Hard money loans are a type of asset-based loan financing which is usually applied for through private lenders. Typically, lenders are more interested in your credit score than anything when examining your ability to repay a loan. If you have a good credit history and you can show that you’re a responsible candidate, then you’ll likely have a better chance at getting approved.
However, it’s a slow process even if you have a good credit rating. It can also be troublesome if you’re trying to build up your credit rating because the checks involved are slow and painful, making traditional loans a poor choice for anyone who wants to take swift action.
The Difference With Hard Money Lenders
Hard money lenders use collateral instead of your credit rating. This means that they’re not as concerned about your ability to repay because they can get their money back with your collateral. The value of the collateral is more important than your history with money. This might sound scary at first, but there are many fantastic advantages to hard money loans and many different applications. In addition, hard money lending is regulated and safe much like any other loan with a bank. As long as you can pay back the loan, you won’t lose your collateral.
Why Use Hard Money?
Hard money is generally seen as a scary choice when borrowing money because of the fear of losing your collateral and also due to higher interest rates. However, there are many uses for hard money loans and many advantages over typical credit rating-based lenders.
- Hard money is faster to approve. Hard money loans are much faster to approve because they don’t require credit rating checks. As long as the lender is happy with the collateral you are offering and they can value it quickly, then your loan will be quickly approved.
- Hard money arrives in your account fast. Your money will also arrive in your bank account much more quickly than a typical loan. You won’t need to go through a complicated process nor wait for your credit rating to be checked. This also means that once you gain familiarity with a lender, you can make future loans much more quickly as well.
- Hard money agreements are more flexible. Hard money agreements are far more flexible than typical loans. There is often some room for negotiation for things like repayment schedules and collateral value. Most of the time, private lenders are willing to talk and treat you like a valued client, not another random customer.
- Hard money loans are convenient. Because of the speed, quick approval and relationship that you can build with the private lender, hard money loans are much more convenient than regular loans.
- Hard money opens up more opportunities. Hard money loans open up funding for projects that usually wouldn’t be possible with regular loans. Hard money loans can be short-term and you can take on risky projects that banks are usually too afraid of taking on.
Hard money has many advantages, so don’t be afraid to give them a try for funding your next major project.